How to do a cloth simulation in Blender?
First of all you need to create two geometry first are UV sphere and plane. Use shift+a to add a mesh. Now select the plane mesh and go to edit mode (press tab) select all (press a) then press w to call special menu and select subdivide. I prefer to increase the number of cuts to 10 (more are better but slower).

After this you can optionally add modifier subsurf and turn on shading smooth, for better look of the cloth.

Next, go back to object mode and with the plane still selected, navigate to physic tab in the property panel. Select cloth in the first column, third row.

Then select the UV sphere and directly navigate to physic tab again and select collision in the first column, second row.

Now you can start play the animation by pressing alt+a or the play button in timeline. The cloth sims now should start.